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The Role of Strategic Decision in Organization Design

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Intro to Orgs Week 2

The Role of Strategic Decision in Organization Design

Organizational goal: desired state of affairs that organization attempts to reach  (represents result/end point which efforts are directed)

  • Purpose and direction shapes how org is designed and managed
  • Primary responsibility of top management: determine org’s goals, strategy and deisgn, thereby adapting organization to changing environment

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  • Direction-setting process begins with assessment of opportunities and threats in external environment, and assess internal strengths and weaknesses to define company’s distinctive competencies with other firms
  • Next step: define and articulate organizations’ strategic intent – includes defining overall mission and golas based on correct fit between external opportunities and internal strengths, then formulate specific operational goals and strategies that define how org accomplishes mission
  • Org design. = administration and execution of strategic plan  designed for learning and innovation (organic approach) v mechanistic approach (achieve efficiency), choices about info and control systems, type of production, HR policies, etc.
  • Performance measurements feed back into internal environment, so past performance is assessed by top managers in setting new goals and strategic direction for the future
  • Essence of strat mgmt.: setting goals, defining strategies for achieving goals, measuring effectiveness of efforts

Organizational purpose

Strategic Intent

  • Many types of goals exist in orgs, each performs a different function
  • Org goals and strategies are focused with strategic intent: all the org’s energies and resources are directed towards a focused, unifying and compelling overall goal
  • Strategic intent provides focus for management action
  • Three aspects related to strategic intent: mission, core competence, competitive advantage

Mission

  • Overall goal for the organization, the organization’s reason for existence
  • Describes the org’s shared values and beliefs, and its reason for being
  • Mission sometimes = official goals, formally stated definition of business scope and outcomes the business is trying to achieve
  • Primary purposes: communication tool
  • Communicates to current and prospective employees, customers, investors, (stakeholders)

Competitive Advantage

  • Overall aim for strategic intent – org to achieve sustainable competitive advantage
  • Distinctive edge for meeting customer or client needs in the marketplace
  • Managers analyze competitors and int/ext environment to find potential competitive openings and learn new capabilities
  • Smart managers steer orgs towards blue oceans, uncontested market spaces with less competition

Core Competence

  • company’s core competence: something the org does especially well in comparison to its competitors

Operating Goals

  • org’s mission and overall goals provide basis for developing more specific operating goals
  • operating goals designate the ends sought through actual operating procedures of the org
  • describe specific measurable outcomes that are often concerned with the short run
  • pertain to primary tasks, specific goals for each pri task provide direction to daily decisions and activities
  • e.g. performance goals, resource goals, etc.

Overall Performance Goals

  • profitability reflects overall performance of for-profit orgs
  • net income, earnings per share, return on investment
  • nonprofit: no goals of profitability, but those that attempt to specify delivery of services to clients/members within specified expense levels
  • e.g. providing accurate response to 85% of taxpayer questions about new tax laws

Resource Goals

  • pertain to acquisition of needed material and financial resources from the environment
  • involve obtaining financing for the construction of new plants, less expensive sources for raw materials, hiring top-quality technology graduates
  • e.g. Starbucks form alliance with tata group to obtain Indian premium arabica coffee
  • nonprofit org resource goals: recruiting dedicated volunteers, and expanding the org’s funding base

Market goals

  • relate to market share or market standing desired by org
  • largely the responsibility of marketing, sales, advertising
  • also apply to nonprofit orgs, Cincinnati Children’s hospital – gain share of national market by developing expertise in niche of treating rare and complex conditions and relentlessly focusing on quality

Employee Development goals

  • pertains to training, promotion, sales and growth of employees
  • related to higher levels of performance
  • development of core skills is an important factor

Productivity

  • concern the amount of output achieved from available resources
  • typically

57 Goal conflict and Hybrid Organization

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